Tuesday, February 22, 2011

On Adam Smith, the Inevitability of the Market Economy, and the Wealth of Nations

On Adam Smith, the Inevitability of the Market Economy, and the Wealth of Nations

IntroductionAdam Smith, in Wealth of Nations, attempts to model ideal economic development using observations of history and European development. Under the Wealth of Nations model, labor is an exchange for goods or services, which is then converted to currency as a proxy for direct barter. Smith further describes the progression from agricultural beginnings to market economies, and the resultant social organization that is causal to market forces – the differences between pastures and cities, wealth and poverty, and state and empire. The model of societal development that Smith advances is used to explain economic growth and trade relations. Smith, then, applies his findings of trade relations to those between the British Empire and the American colonies, leading him to the conclusion that overseas colonies are expensive, and are better served as independent nations. Smith’s works still have many vital lessons to teach both nations and international organizations, even after nearly two and a half centuries.On the Division of Labor In the Smith model derived from Wealth of Nations, Smith begins by describing the effects of division of labor on the pin industry. Smith found this industry to both be “trifling” as well as a solid footing to start with.[1] It is because of the perception of unimportance that Smith chooses pin making, for if it works in such an insignificant industry, it must likewise apply to more substantial industries. Smith observed that a lone pin maker, “could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly not make twenty”.[2] Smith concludes that changing from task to task is a drain on productivity, necessitating changes in tools as well as a change in thought: “When he [a laborer] first begins his new work he is seldom very keen and hearty; his mind […] does not go to it, and for some time he rather trifles than applies to good purpose”.[3] The specialization that results from a defined division of labor increases the amount of work performed per unit, per labor time, without the loss of productivity from “chang[ing] his work and his tools every half hour, and to apply his hand in twenty different ways”.[4] Smith lists the different tasks required to make and package pins:One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another, it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen different operations […] [5] This round-robin method of dividing the tasks among different employees ensures that no individual is left waiting for another employee. Further, division of labor in this manner reduces or removes the queue of pins, maximizing individual productivity. In modern usage, this is known as the assembly line process. Smith thought this process so good at maximizing productivity that he predicted that, given ten employees, output would reach “forty-eight thousand pins in a day”.[6] Had each pin “been wrought separately and independently,” Smith concludes, “they certainly could not each of them made twenty, perhaps not one pin in a day”.[7] Smith attributes this to the efficiency conferred by the division of labor.[8]

On Durable Goods and the Market Smith applies these observations to naturalistic settings, determining that the origin of division of labor is also the origin of trade. Smith finds that exchanges are “more likely to prevail if he [an individual] can interest their [another person] self-love in his favor, and shew [sic] them that it is for their own advantage to do for him”.[9] In the past, this was accomplished by direct exchanges and bartering, trading ability in one skill or craft for another.[10] In Smith’s example of a naturalistic setting, when one is good at making bows and arrows, they should devote all of their time and resources to making bows and arrows, and using them to trade for meat and clothing; likewise, the clothier will trade his clothes for meat, freeing up the hunter to focus exclusively on hunting and acquiring more meat to use as his barter.[11] Lacking infrastructure, goods can only be exchanged locally; however, the goods provided for in this system of exchanges are only limited by their ability to be procured.[12] The largest centers of commerce, Smith’s model predicts, are those who have both a transportation system as well as a route of exchange.[13] Navigation by sea, Smith explains, has historically been the most successful and commercially important routes for trade. In the Americas, sailing ships provided the transportation and the trade winds provide the route; just as in Egypt, where canals along the Nile allowed easy trade; and India, the Ganges was an important trade route.[14]On Money In Smith’s model of societal advancement, once division of labor is established, there is a tendency of an individual to amass more resources than he can use himself.[15] Once trade is established, each member of society becomes a merchant for his own wares, beginning the age of “a commercial society”.[16] As the infrastructure of the market evolves, direct exchange of goods becomes cumbersome and inefficient.[17] While a number of proxies may have been tried, pure precious metals have become preferred. Smith’s notes that the benefits to using metals are that they are not perishable commodities, metals are able to be stored for a long time without loss of value, and that metals are divisible, able to be broken apart – and later rejoined by the same process used to forge them.[18] Smith also notes that the metal of value likewise evolved with cultural development, stating that “iron was the common instrument of commerce among the antient [sic] Spartans; copper among the antient [sic] Romans; and gold and silver among all rich and commercial nations”.[19][20] The currency, through evolution, became standardized by governments, both to fix the exchange rate and protect against fraud of adulteration. Smith notes two factors in the use of currency as a proxy for goods or services, which define the value of the currency: “The one may be called ‘value in use;’ the other, ‘value in exchange’”.[21] Smith observes that items of great value in use, such as water, have little to no exchange value; on the contrary, objects with little value in use have considerable value of exchange, such as the precious metals or diamonds.[22]On the Value of Labor in Relation to Money With the foundations of the market and the use of money in place, Smith returns to labor. Labor, Smith writes, is the real measure of value: “The real price of every thing, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it”.[23] Therefore, currency is a proxy for acquiring the labor of others: “When barter ceases, and money has become the common instrument of commerce, every particular commodity is exchanged for money than for any other commodity”.[24] Further, while currency values may fluctuate, the “cost” of labor is fixed at the rate of labor per unit of time: “Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer,” but the value of that labor to another may vary according to the value of the goods produced by the labor.[25] Smith states that “labour, like commodities, may be said to have a real and a nominal price”.[26] The value of skills provided by labor is priced according to the demand of the skill; if the skill is scarce, the cost and value of the skill increases, thus increasing wages paid to the laborer. Likewise, if there are many more people with a skill than are jobs to utilize them, the value decreases, in the form of lower wages. Labor, currency, and goods are subject to these same market forces of supply and demand. Smith uses, as his example, the consequence of metal mines in the Americas: “The discovery of the abundant mines of America reduced, in the sixteenth century, the value of gold and silver in Europe to a third of what it had been before. As it costs less labour to bring those metals from mine to the market, so when they were brought thither they could purchase or command less labour”.[27]On the Development of Society, Trade, and the MarketSmith writes that human societies develop through three stages: agriculture, manufacture, and finally foreign commerce.[28] Critical to these developmental stages are the evolution of pastoral communities toward towns and cities. While agrarian communities are of benefit to the production of food, Smith observes that cities and towns “arrived at liberty and independency much earlier than the occupiers of land in the country”.[29] This seems, as Smith writes, to have been a consequence of market trade; goods coming from the countryside were subject to taxes and tolls when crossing bridges, passing through other communities (“when they passes through certain manors”), and when selling goods in the marketplace.[30] The liberties that were gained in the towns and cities also consolidated power under the “sovereign” of the nation; previously, the lords of land, having “slaves or vassals” were autonomous, having great power on the lands under their control.[31] Cities, further, were given the power to regulate their own taxation: “the sovereign could impose no tax, besides the stated farm-rent of the town, without their [city’s citizens] consent”.[32]The product of these new freedoms enabled cities to become large central hubs. Smith writes that, “the inhabitants of a city, it is true, must always ultimately derive their subsistence […] from the country”.[33] Powerful cities of trade, however, if in proximity to infrastructure of trade, “are not necessarily confined to derive them [goods] from the country of their neighbourhood”.[34] The large amount of regional trade would become the birth of globalization, and the golden ages of antiquity were measured in trading power. Smith mentions that Italy benefited from the crusades, being the first to reach “opulence”.[35] The benefit of the crusades came from the flow of goods from temporarily controlled lands of the Turks, shipping through “Venice, Genoa, and Pisa”.[36]The principle of comparative advantage is also mentioned by Smith. While Smith did not use the term “comparative advantage”, he was clearly aware of the principles. Smith writes, “The inhabitants of trading cities, by importing the improved manufactures and expensive luxuries of richer countries, afforded some food to the vanity of the great proprietors, who eagerly purchased them with great quantities of the rude produce of their own lands”.[37] When combined with Smith’s observations that every country both has a manufacture, as well as the observation that “no large country […] ever did or could subsist without” manufactures produced elsewhere, this is exactly the importance of trade in comparative advantage.[38] Were the marketplace diluted among vastness of Europe, the Middle East, and Asia, trade would be inefficient; rather than wandering about randomly until the desired good is found, the centralized nature of the cities and towns, then, becomes about easing access to the markets, decoupling the origin of a good from its sale.[39] Foreign commerce allows regions to focus on industries that they are good at, trading what they have a surplus for what they have in scarcity.[40] In these terms, comparative advantage is simply an extension of the division of labor that precedes the use of currency.On Colonialism Smith retraces the ancient history of colonialism. Before the age of exploration, Europe was limited to the known lands. Colonies in Europe had been established to expand a city’s influence beyond its borders, as well as provide a new source of land when the old city became fully populated.[41] While the “mother-city” enjoyed a preferential relationship with the colony, the usual practice was to allow the colony self-government and autonomy.[42] Further, colonies were also established to maintain stable sources of trade with foreign lands, such as the European colonies in the West Indies.It was the desire to “share in the profitable traffic of the Venetians” that directed the European powers to the west, searching for an alternate route to “the countries from which the Moors brought them ivory and gold dust across the Desart [sic]”.[43] After the discovery of the Americas, the European powers established colonies with a minimum of interference, leading Smith to conclude that the lack of interference was causal to their prosperity.“Towards the end of the end of the fifteenth, and during the greater part of the sixteenth century, Spain and Portugal were the two great naval powers upon the ocean”; however, “The Spaniards, in virtue of the first discovery, claimed all America as their own; and though they could not hinder so great a naval power as that of Portugal from settling in Brazil”.[44] Despite their early start in colonizing the Americas, the defeat of the Spanish Armada enabled other European powers to establish colonies of their own. While Sweden established the colony of New Jersey, their neglect of the colony allowed the Dutch colony of New York to subsume the Swedish colony.[45][46] The Dutch, divided between the Americas and the East Indies, chose the latter as their preferred colony, allowing the English to rule the North American colonies.On the Prosperity of the Colonies Although the history of colonial empires is complex, and despite the continued English rule of the North American colonies as of the time of his writing, Smith notes several factors that contributed to the prosperity of the English colonies.The first is that of the practice of exclusive companies to manage trade between the colonies.[47] Smith observed this in the French colony of Canada, enjoying prosperity after the dissolution of the French exclusive company.The second factor Smith observes is the effect of liberal treatment and policies between Britain and her colonies. Smith notes the relative autonomy of the American colonies, unprecedented in history, and likens them to independent nations. Smith explains that the effect of the liberal treatment of the American colonies is responsible for the development of American liberties and the egalitarian political structure. With the exception of British mercantilism, where the British required the colonies use Britain as the sole gateway for trade, the American colonies by then already acted as an independent nation.[48]The last factor Smith observes is the moderate taxation of goods, both from and to the American colonies. The lower taxes in the American colonies allowed the colonists to purchase more goods from England, which collected taxes on both sides of the transaction. However, Smith critically remarks, repeatedly, about the expense to the British treasury in defending the colonists, the colonies, and shipping convoys, the cost of which was disproportionately paid for by English citizens in England: “The English colonists have never yet contributed any thing towards the defence of the mother country [England], or towards the support of its civil government. They themselves, on the contrary, have hitherto been defended almost at entirely at the expence of the mother country.”[49] It is for this reason that Smith advocates for the voluntary withdrawal from the management of the American colonies, noting that while the nation’s pride may suffer, the relationship may even prove to be more beneficial to both sides. Smith writes,“Great Britain would not only be immediately freed from the whole annual expence of the peace establishment, of the colonies, but might settle with them such a treaty of commerce as would effectively secure to her a free trade, more advantageous to the great body of the people, less so to the merchants, than the monopoly which she presently enjoys.”[50] Smith believes that the trade relationship, while open to free trade with other nations, without the mother country as an intermediary, would be more advantageous for Great Britain. Smith justifies this position by explaining that the true costs of maintaining the colonies are not being paid by the colonists, but by British citizens in Britain, and that the removal of capital from Great Britain is detrimental to British industry. Were the American colonies spun-off into an independent entity, American merchants would bear the cost of shipping and the British would no longer need to remove such a vast quantity of capital from their economy to maintain soldiers for defense, and sailors for convoys.[51] These costs prompted Smith to state that, although the possession of the American colonies has benefitted Britain with increased wealth, the amount of increase is not as great as could be if the colonies of the Americas became independent foreign nations.[52] The monopoly of trade with the American colonies makes the purchase of American goods in Britain less expensive, but the true costs are hidden in the cost of maintaining the infrastructure to support this trade. The hidden costs are passed along in Britain’s trade of American goods, such as corn and tobacco, to other European nations in the form of higher prices. In order for the other European nations to make up for the money lost, the prices of foreign goods destined to either Britain or the Americas are increased.[53] From this, Smith concludes that abandoning the trade monopoly with the colonies, in addition to eliminating the expense of maintaining the shipping infrastructure, would lower the cost of American goods to the European countries, and lower the cost of European goods sold to Britain.[54]Smith's Four Roles of GovernmentSmith’s fifth book is his elaboration of the four fundamental roles of government. Smith, having rejected mercantilism as too great an expansion of a nation, impresses the importance of the core responsibilities to an effective and effectual government. These are the common defense of the country by way of an army, the system of courts and justice to protect private property, and the infrastructure of the market, including roads and banks, and public education.Common DefenseSmith’s first government role is that of defense of self-defense, through the military. In a hunter society, Smith writes, the cost of defense is nothing because, “every man is a warrior as well as a hunter.”[55] In the next stage of societal development, the animal husbandry stage, the cost of war is still intangible. Smith states that shepherds are “accustomed to a wandering lifestyle,” and therefore their entire society physically moves to war.[56] “When such a nation goes to war, the warriors will not trust their herds and flocks to the feeble defence of their old men, their women and children, and their old men, women and children, will not be left behind without defence and without subsistence.”[57] The benefit of winning the battle, therefore, entitles the victor to the possessions and belongings of the defeated; likewise, if defeated, the cost is the loss of life, loss of property, and Smith states, “their women and children become booty of the conqueror.”[58] Thus, it is through the division of labor, which Smith introduced in the very beginning of Wealth of Nations, that the cost of war begins to emerge. When the market economy begins to emerge, and the division of labor begins to separate the population by occupation, it becomes necessary to develop a professional military. Smith gives two methods to accomplish this: the first is the enforcement of compulsory military service, the second is to “render the trade of soldier a particular trade, separate and distinct from all others.”[59] The first, which Smith calls a militia, has historically been composed of ordinary people who periodically train, but are not “attached to any particular body of troops” until called up to engage in warfare.[60] The second is composed of regular troops that receive constant training and are subject to military discipline, and are thus more knowledgeable and become experts in warfare. Comparing a militia to a standing army, Smith writes, “The soldiers, who are exercised only once a week, or once a month, can never be so expert use of their arms, as those who are exercised every day, or every other day.”[61] Smith further defends standing armies as being necessary for the safety and preservation of a civilization, the only way to stave off “invasion of a poor and barbarous neighbor.”[62] However, Smith has reservations about the expense of a standing army, recognizing not only the cost of both provisions and equipment during wartime, but also provisions, equipment, and training during peacetime.[63]Justice and CourtsSmith continues his discussion of the essential roles of government, naming a system of justice as the second of the four roles. Smith states, “the second duty of the sovereign, that of protecting, as far as possible, every member of the society from the injustices or oppression of every other member of it, or the duty of establishing an exact administration of justice”.[64] While the role of the military is the protection of the nation from outsiders, a system of justice has the responsibility of protecting the insiders from each other. In Smith’s model of societal development, a hunter society has no property, except for the products of labor for subsistence. When the division of labor allowed the production of a surplus of goods, and surplus goods became a proxy for wealth and lead to the emergence of social classes, there emerged a real need to protect private property.[65] While Smith notes that the courts are a cost to government, the social stability that justice enables more than offset the expense, and that governments can use court fees to offset this cost. It is Smith who, more than theoretically, believes the reason that the judiciary must be independent from the executive power is so that the judicial branch could specialize and focus on the law, and provide “the undivided attention of the persons to whom it [justice] was entrusted”; likewise, the executive should focus on the business of administration of the country.[66]Public WorksSmith’s third role of government is the development and maintenance of infrastructure. Smith lists roads, bridges, canals, and harbors as components of infrastructure that the government is responsible for.[67] Smith does not believe, though, that taxes from the general public need to be the only source of revenue; rather, tolls and charges for use and privilege of the infrastructure is a potential – and more equitable method of defraying the costs of infrastructure. Smith was a supporter of differential taxation, advocating “toll upon charges of luxury, upon coaches, postchaises, &c. made somewhat higher in proportion to their weight, than upon that carriages of necessary use, such as carts, wagons, &c.” as a means of allowing both the rich and poor access to the same infrastructure.[68] The practicality of paying for the bridge with usage charges, Smith argues, is necessary to prevent infrastructure explosion beyond what can be borne by the market; “A magnificent high road cannot be made though a desart [sic, recte desert] country where there is little or no commerce, or merely because it happens to lead to the country villa of the intendant of the province, or to that of some great lord to whom the intendant finds it convenient to make his court.”[69] Smith believes, though, that only canals should belong to individuals, both for accountability and as incentive to maintain the infrastructure in good condition, to reap a profit when the canal is paid for, and to avoid the loss of use of a canal if it is in a state of disrepair. Smith believes that a government official, who does not hold personal equity and interest in the canal would be less attentive to maintenance and upkeep.[70] Roads, however, Smith believes should be reserved to a group of trustees, rather than a private individual, because “the proprietors of the tolls upon a high road, therefore, might neglect the road altogether the repair of the road, and yet continue to levy very nearly the same tolls.”[71]A second component of the public works that Smith believes is a necessary role of government is the banking infrastructure. While a transportation infrastructure is certainly necessary for commerce, there are other requirements for stable trade. For this, Smith lists forts, garrisons, embassies and ambassadors, as well as a banking system. For these, Smith allows funding to be provided for by taxes, suggesting “a particular of so much per cent. upon the goods which they either import into, or export out of”.[72] A stable banking sector is also important to a commerce society, so much so that Smith explicitly allows them to be contained in a monopoly; their stability is crucial to providing credit, liquidity, and even acting as a lender of last resort to the government.[73]EducationSmith’s final role for the government is the education of youth. Smith, in examining the legacy of division of labor, has come to the conclusion that the division of labor has the effect of stifling the mind of a worker:“The man whose whole life is spent in performing a few simple operations, of which the effects to are the same, or very nearly the same, has no occasion to exert his understanding, or to excuse his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to begin.[74]Despite the benefit of economic growth, stupidity, Smith states, is the natural consequence. Education of the youth, therefore, is the natural antidote for this consequence. Smith advocates for, at the very least, a national requirement to learn how to “read, write, and account”; Smith states that even those in the “lowest occupations” will have need for these skills, and that “for a very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education.”[75]On Public Debt Throughout the Wealth of Nations, Smith constantly makes reference to debt. In the individual, credit is a method that industry uses to multiply and leverage its own buying power, and credit allows an individual to multiply his purchasing power – trading future labor for the ability to have now what he will have the money for in the future. Smith has repeatedly mentioned that in wartime, the sovereign of a nation must go into debt when the wealth of the nation runs short of cash to maintain its troops, as happened during the Seven Years’ War in the Americas – and that the American colonies had paid almost none of the cost. The debt of the government is properly called the public debt. Smith notes that prior to the advancement of Europe, national monetary policy was focused on the hoarding of money: “All the ancient sovereigns of Europe accordingly […] had treasures.”[76] With no luxuries or manufactures, forced savings was the effect; however, the rise of industry, advanced trade, and maintaining infrastructure increases expenditure to the level of revenue.[77] In wartime, rising costs bring already high expenses above the amount of income, necessitating sovereign debt to be incurred: “An immediate and great expence must be incurred in that moment of immediate danger, which will not wait for the gradual and slow returns of the new taxes. In this exigency government can have no other resource but in borrowing.”[78] Easy access to credit enables the government to think of its credit as a part of its wealth and currency reserves, freely spending and not seeing the need to save.[79] However, when the credit markets freeze, and there is no more money to lend, the government returns to saving: “In such a state of things few people would be able, and nobody would be willing, to lend their money to government on extraordinary exigencies. The sovereign feels that he must provide for such exigencies by saving because he foresees the absolute impossibility of borrowing.”[80] Smith cautions against the reliance on credit, and warns against thinking of credit as additional capital. Despite the role of credit in the short term multiplication of buying power, Smith sees that the government “does not consider that the capital which the first creditors of the public advanced to government was, from the moment in which they advanced it, a certain portion of the annual produce turned away from serving in the function of a capital to serve in that of a revenue”.[81]Smith, foreseeing a problem not with borrowing, but with repayment, observes that whatever public revenue is collected, even after the imposition of further taxes, tends not to cover much more than even the interest on debt; further, Smith notes that the imposition of new taxes to pay the debts encourages evasive behavior, such as non-repatriation of money so that taxes are not paid.[82] Finally, between taxation and tax-evasion, there is the probability of removing money from the national money supply, which drains the wealth of the nation. By moving money from the many to repay creditors, the capital of industries and farms is reduced, and lessens the owner’s ability to expand and improve, further causing a decline in output, further draining the wealth of a nation.[83] The only end to unchecked debt accumulation, Smith predicts, is bankruptcy: When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about by bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.[84] The only possible way, Smith states, of repaying the debt with a “pretend payment” is with a devalued currency. If the currency is worth less, the debtor is not paid on proportion, but on the fixed quantity; “A national debt of about a hundred and twenty-eight millions, nearly the capital of the funded and unfunded debt of Great Britain, might in this manner be paid with about sixty-four millions of our present money.”[85] When the value of the coin is worth so much less, and the cost of goods is constant, the value needed to purchase the goods is still fixed, and it is necessary to use more coin of the currency, which is again worth less – driving a cycle of inflation.[86] With regards to the British debt of Smith’s time, Smith sees the British with two options: force the Americans to pay their portion of the accumulated debt, or divest itself of the colonies. With regards to the first suggestion, the colonies would surely revolt requiring another costly war, and without Britain’s “coercive power” holding the colonial factions at bay, the colonies would descend into “open violence and bloodshed.”[87] The second solution, “If it should be found impracticable for Great Britain to draw any considerable augmentation of revenue from any of the resources above mentioned, the only resource which can remain to her is a diminution of her expence.” [88] Smith, advises Britain to withdraw from the American colonies, precisely by letting go of the colonies, which continue to hemorrhage capital, and not to throw good money after sunken costs.[89]ConclusionsSmith’s model of societal development is a good generalization of the history of Europe, and the model seamlessly flows from the first to the next premises. Smith’s examination of individual development, from hunter, to barterer, to specialist in the division of labor – a salesman of his own wares, to the more advanced commerce consumer is well juxtaposed with the model of national development. A nation begins as a hunter-gatherer civilization – banded together of common clans, moves to an agrarian society where there is barely more than subsistence, to a commercial society that trades advanced industry for labor, labor for currency – and that currency for food. Once the nation is producing extra goods internally, their surplus may be sold to other nations. Smith would now say that the reliance and interdependence of trade brings peace, peace brings stability, and stability brings profit to all the nations involved. The only wars would be those of commerce, not arms; it would be the market, not the governments who would be the mediators and referees.It is in the last two pages of Wealth of Nations, that Smith hides his real advice for the sovereigns. The goal of Wealth of Nations, at the conclusion, seems to be an analysis of mercantilism, and an assessment of the benefits of this trade to Britain in comparison to the costs spent to maintain and hold the colonies. Smith was writing Wealth of Nations between 1773 and 1774, and was experiencing the same resentment the British populace felt. The British debt at that time explains the various taxes and tariffs on the colonies, and being used to low or no taxes for decades, then being forced to pay them, is what brought on the American War of Independence. As surreal as it is to read about New England when it was indeed new, when the Carolinas were just plantations and tobacco fields, and when New York was known for high wages of laborers, Smith delivers, nonetheless, sound advice from an economic perspective. Smith, wisely, knew that the best way for the British to benefit from the trade of the colonies was to stop paying for the living expenses of the colonies. An independent America would make the Americans responsible for their own defense, and wean them off the teat of their mother country, which was sucking British resources and wealth dry.Modern ApplicationsSmith’s ideas of the effects of sovereign debt are still salient today, especially because of the ongoing global liquidity crisis. According to an article by Antonia Van de Velde, published on CNBC.com, titled Think BIIGS: There’s One Euro Country Under the Radar, Belgium is also facing an economic crisis. Belgium is unique among the troubled euro states today for two reasons: the first, that Belgium currently lacks a national government; second, that Belgian “public debt is just under 100 percent of gross domestic product”.[90] Essentially, Belgium is indebted to the world the entire sum of one year’s economic production; applying Smith’s ideas to Belgium, it is obvious that capital is being diverted from useful stock and productivity towards unproductive debt repayment.The Republic of Ireland is also in a crisis, now indebted to the entirety of the Eurozone and the United States; applying the ideas of Smith with regards to public debt: the Republic of Ireland must now pay a value that it cannot afford, with a currency it does not have, owing money to trade partners who are only concerned with their own national. Smith believed that the end goal of all public debt is bankruptcy or hyperinflation of the nation’s currency. A particularly relevant question is uncovered in this line of inquiry: what happens to the value of the euro as the countries that use it default at different times. Ireland cannot make pretend payment, as the result of the government increasing the supply of money without increasing real money, causing the value of the money to decrease. Since the other option is bankruptcy, what effect will a bankrupt Belgium or Ireland have on the value of the euro in the Netherlands, in France, in Romania? These are important questions for our time, and have been influenced, as well as informed, by these arguments of Smith.[1] Smith, Book I, Ch. 1, p. 10[2] Smith, Book I, Ch. 1, p. 10[3] Smith, Book I, Ch. 1, p. 16[4] Smith, Book I, Ch. 1, p. 16[5] Smith, Book I, Ch. 1, p. 11[6] Smith, Book I, Ch. 1, p. 11[7] Smith, Book I, Ch. 1, p. 11[8] Smith, Book I, Ch. 1, p. 11-12[9] Smith, Book I, Ch. 2, p. 23[10] Smith, Book I, Ch. 2, p. 24[11] Smith, Book I, Ch. 2, p. 24[12] Smith, Book I, Ch. 3, p. 28[13] Smith, Book I, Ch. 3, p. 30[14] Smith, Book I, Ch. 3, p. 30[15] Smith, Book I, Ch. 4, p. 33[16] Smith, Book I, Ch. 4, p. 33[17] Smith, Book I, Ch. 4, p. 33[18] Smith, Book I, Ch. 4, p. 35[19] Smith, Book I, Ch. 4, p. 36[20] Smith, Book I, Ch. 4, p. 37-38[21] Smith, Book I, Ch. 4, p. 41[22] Smith, Book I, Ch. 4, p. 41[23] Smith, Book I, Ch. 5, p. 43[24] Smith, Book I, Ch. 5, p. 45[25] Smith, Book I, Ch. 5, p. 47[26] Smith, Book I, Ch. 5, p. 48[27] Smith, Book I, Ch. 5, p. 46[28] Smith, Book III, Ch. 1, p. 486[29] Smith, Book III, Ch. 3, p. 506[30] Smith, Book III, Ch. 3, p. 505[31] Smith, Book III, Ch. 3, p. 508[32] Smith, Book III, Ch. 3, p. 511[33] Smith, Book III, Ch. 3, p. 512[34] Smith, Book III, Ch. 3, p. 512[35] Smith, Book III, Ch. 3, p. 513[36] Smith, Book III, Ch. 3, p. 513[37] Smith, Book III, Ch. 3, p. 513[38] Smith, Book III, Ch. 3, p. 514[39] Smith, Book III, Ch. 4, p. 519[40] Smith, Book III, Ch. 3, p. 521[41] Smith, Book IV Ch. 7, p. 704-705[42] Smith, Book IV Ch. 7, p. 704-705[43] Smith, Book IV Ch. 7, p. 707[44] Smith, Book IV Ch. 7, p. 721[45] Smith, Book IV Ch. 7, p. 723[46] Smith, Book IV Ch. 7, p. 723[47] Smith, Book IV, Ch. 7, p. 725[48] Smith, Book IV, Ch. 7, p. 742[49] Smith, Book IV, Ch. 7, p.727[50] Smith, Book IV, Ch. 7, p. 783[51] Smith, Book IV, Ch. 7, p. 781.[52] Smith, Book IV, Ch. 7, p. 796[53] Smith, Book IV, Ch. 7, p. 796[54] Smith, Book IV, Ch. 7, pp. 761-762[55] Smith, Book V, Ch.1, Part I, p. 879[56] Smith Book V, Ch. 1, Part I, p. 880[57] Smith Book V, Ch. 1, Part I, p. 880[58] Smith Book V, Ch. 1, Part I, p. 880[59] Smith Book V, Ch. 1, Part I, p. 888[60] Smith Book V, Ch. 1, Part I, p. 889[61] Smith Book V, Ch. 1, Part I, p. 890[62] Smith Book V, Ch. 1, Part I, p. 898[63] Smith Book V, Ch. 1, Part I, p. 899[64] Smith Book V, Ch. 1, Part II, p. 901[65] Smith Book V, Ch. 1, Part II, p. 901[66] Smith Book V, Ch. 1, Part II, p. 915[67] Smith Book V, Ch. 1, Part III, p. 917[68] Smith Book V, Ch. 1, Part III, Article I, p. 919[69] Smith Book V, Ch. 1, Part III, Article I, p. 919[70] Smith Book V, Ch. 1, Part III, Article I, p. 920[71] Smith Book V, Ch. 1, Part III, Article I, p. 920[72] Smith Book V, Ch. 1, Part III, Article I, p. 928[73] Smith Book V, Ch. 1, Part III, Article I, p. 960[74] Smith Book V, Ch. 1, Part III, Article I, p. 987[75] Smith Book V, Ch. 1, Part III, Article I, p. 990[76] Smith Book V, Ch. 3, p. 1155[77] Smith Book V, Ch. 3, p. 1155[78] Smith Book V, Ch. 3, p. 1156[79] Smith Book V, Ch. 3, p. 1158[80] Smith Book V, Ch. 3, p. 1159[81] Smith Book V, Ch. 3, p. 1159[82] Smith Book V, Ch. 3, p. 1181[83] Smith Book V, Ch. 3, p. 1182[84] Smith Book V, Ch. 3, p. 1184[85] Smith Book V, Ch. 3, p. 1185[86] Smith Book V, Ch. 3, p. 1188[87] Smith Book V, Ch. 3, p. 1205[88] Smith Book V, Ch. 3, p. 1207[89] Smith Book V, Ch. 3, p. 1207[90] Van de Velde, 2010.

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Eliyahu N Kassorla

About Me

I graduated Spring 2011, cum laude, with a degree in psychology, with minors in sociology and political science from New England College, in Henniker, NH.

I have concentrated in the study of biology and evolution on behavior. I have examined the the relationship of individual biology on behavior, on the emergence of societal organization from individual behavior, and the interaction between individuals and society.

I have also examined the effects of trauma, and the interactions between hormones, biology, and behavior.

I am currently attending Northeastern University to pursue a BS in Health Science, and will be applying to Masters of Science in Nursing programs to become an ARNP.

I want to work with children and families in primary care.

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I maintain ownership of all of my original work. Any unauthorized use is prohibited. They are provided for enjoyment only, both yours and mine.I maintain high standards and think plagiarism sucks. Feel free to look at my papers, draw inspiration from them, or even pass them to your friends. Just don't steal my work and pass it off as your own. That's not cool.Otherwise, enjoy!